What is the Loan Comparison?
Comparing loans on interest rate alone is the most common borrowing mistake. Fees, term length and any upfront charges all change the true cost, and a headline rate can easily hide a worse deal.
The only fair comparison is total cost over the same period: all payments plus every fee.
Formula & worked example
Total cost = Payment × N + fees
Worked example: 250,000 over 20 years. Offer A at 6.5% with 1,500 of fees costs about 1,864 a month. Offer B at 6.1% with 4,500 of fees costs 1,806 — 58 less monthly. Over the full term Offer B costs 437,827 against Offer A's 448,844, saving 11,017 despite the far larger upfront fee, because the rate saving compounds across 240 payments.
How to use this loan comparison calculator
- Enter the same loan amount for both offers.
- Enter each offer's rate, term and total fees.
- Include every fee: arrangement, valuation, legal, booking.
- Compare total cost, not just the monthly payment.
Smart tips
- A big fee is worth paying for a lower rate on a large, long loan — and not worth it on a small or short one.
- Compare identical terms. A longer term always lowers the payment while raising total cost.
- Ask for the APR, which bundles fees into a comparable rate, though it assumes you keep the loan to term.
- If you plan to repay early, weight the rate less and the fees more.
- Check early repayment charges — they can outweigh a small rate advantage entirely.
Frequently asked questions
How do I compare two loans fairly?
Compare total cost over the same term, including every fee. Rate alone is misleading when fees or terms differ.
What is APR?
Annual Percentage Rate — the interest rate with fees included, designed to make offers comparable. It assumes you hold the loan to term.
Is a lower rate always better?
No. A lower rate with high fees can cost more, particularly on small loans or if you repay early.
Should I choose a shorter term?
Shorter terms cost far less interest overall but require higher payments. Choose the shortest term you can comfortably afford.
Want the theory behind the numbers? Read our borrowing guides on the Money Blog.